Ogden Point Cruise Market Assessment August 16, 2012

1. Ogden PointCruise Market AssessmentAugust 16, 2012 Bermello, Ajamil & Partners

2. Deployment N. Europe Alaska 3 4 2 5 Caribbean 1 Mediterranean Mexico West

3. Growth Since 1995, worldwide passenger levels have tripled Sources: CLIA, PSA, B&A, 2009

4. Lines Source: Cruise Industry News , B&A, 2012

5. Success factors • New products that generate sustained interest; • New, exciting vessels, diverse on-board products and services • New regions, itineraries and on-shore product offerings • Converting land-based guests into cruise passengers; • High level of passenger satisfaction; • leading to repeat clientele and lower conversion costs • Adapt quickly to changing market conditions; and, • Limited competition, reduced operational costs, and diversified revenues.

6. Regulatory • Emission Control Areas • Impacts on fuel consumption • Modified speed & distance • Passenger Services Act • Seattle sailings require a far foreign port • Victoria thrives on this regulation • Is there potential for this to disappear long-term? • Environmental Policy and Monitoring • Alaska monitoring & costs – tied into fee and fares • Victoria cruise emissions, noise and traffic issues • Address these issues pro-actively and positively to meet the needs of the community and insure growth of the industry

7. World cruise growth, 2011- 2037

8. North American growth, 2000 - 2037 NA market growth – Low - 2%, mid – 3.5%, High – 5%

9. Regional growth

10. Alaskan cruise region • Pacific Northwest, Western Canada (BC) and the Alaskan Coast • Influenced by Hawaii, Pacific Coastal, Trans-Pacific, World, etc. • Mainstay of North American summer market offerings • Competes with Med., Baltic & CNE • Big 3 – Ketchikan, Juneau and Skagway • Seattle and Vancouver primary feeders • Victoria – significant for PSA requirement (Seattle market) • Secondary ports – retain small ship, adventure, repositioning and conflict call status

11. Alaska growth factors • World economy (short-term) • Regulatory and environmental issues (mid to long-term) • Alaska fees (short-term) • Seattle and Vancouver berth expansion (mid- to long-term) • POC berthing (mid to long-term) • Fuel Costs (mid- to long-term) • Airlift & hotel infrastructure (long-term) • Panama Canal widening (long-term) • New competitive markets (mid- to long-term) • European entry into Alaska (mid- to long-term)

12. Alaska growth ,2000 - 2037 NA market capture – Low - 7.5%, mid – 8.5%, High – 9.5%

13. Traffic generation

14. Passenger throughput,2000 - 2012 Victoria growth – 10 yrs. – 19.5% per annum / 5 yrs. – 7.6% per annum Seattle growth – 10 yrs. – 24.6% per annum / 5 yrs. – 2.9% per annum

15. Traffic to and From Victoria,2008 - 2012

16. Cruise line feedback and SWOT

17. Key cruise line feedback • Provides marquee value (may not be same through NA) • Most lines prefer more hours in port (itinerary/market issues) • Need a strong complement of Alaska ports • Distance / speed requirements are constraints • Victoria consistently delivers as a port of call • Offers a great deal of high end touring options • Lines prefer full day calls as they are better from a guest perspective • Many lines would not call in Victoria if PSA was rescinded • Most lines foresee no change in respect to ECA for the region • It is a good idea to supplement the current shuttle buses to reduce the strain on the community • Water taxi concept linking Ogden Point with the downtown area • As ships have become larger, port can now only accommodate 3 large ships at one time

18. Opportunities and Challenges

19. Victoria

20. GVHA passenger throughput,2000 - 2012

21. Victoria market capture,2000 - 2012 5-year avg. – 48.6%

22. 2012

23. GVHA cruise calls,2000 - 2012

24. GVHA cruise pax per call,2000 – 2012

25. Forecasting

26. Forecast methodology GLOBAL • World forecasts • Market capture of NA • Market share to Alaska • Market share to Victoria NA ALASKA VICTORIA

27. Preliminary projection overview • Projections anticipate that the cruise industry will continue to follow fundamental positive trends • Forecast methods and various assumptions inherent in each incorporate our best interpretation of demand and supply • Projections are un-constrained in nature and do not take into account the potential berth capacity, utilization or other limiting factors of Victoria or downstream ports (scenario 3 exception) • Conducted separate projection models • Trend regression, regional market capture, Seattle berth capacity • 3 Scenarios based on cruise line trends and opportunities • Scenario 1 - considers SEA/VAN berth capacity and additional new berths • Scenario 2 considers capacity based upon revision of PSA • Scenario 3 - provides constrained outlook: no new berths in Victoria

28. Cruise passenger projection range, 2004 - 2037 Likely composite - 2.8% per annum

29. Passengers per sailing, 2004 - 2037 1.6% Annual Growth

30. Cruise call projection range, 2004 - 2037

31. Constrained Victoria berth scenario, 2004 - 2037 1.5% growth Scenario adds no new berths (demand outstrips capacity) Growth primarily through vessel capacity increases

32. Future berth demand • Peaking causes berth demand issues • Thu – Sat berth demand issue in all scenarios (manage calls in peak months) • Develop 4th berth in conjunction with Seattle (or soonest) with a 5th berth demand in 2018 (based upon likely scenario) • Berth demand is likely for 4 berths into the future with management of berths • Larger vessel deployments likely in region (Solstice in 2013) • Need for facility to accommodate vessels with berth length of 330 meters • Berth and passenger demand drives development phasing and requirements for master planning

33. Moving forward

34. Recommendations • Berths • There is a likely need for a 4th berth soonest • Management of berth assignments is required into the future • Future infrastructure should accommodate 330-m., 150,000 GT, 3,000 plus passenger vessels • Terminal and uplands • Incorporate combined CBSA into Ogden Point • Master Plan should further develop upland layouts for GTA, passenger and vehicle movements

35. Recommendations • Address community issues through planning process • Traffic movement and noise considerations • Use alternative modes of movement – via water, etc. • Use master planning process to separate cruise operations from community via technological mitigation • Education, management and cooperation of owner and stakeholders • Victoria Marketing efforts • Develop NA consumer market – build the knowledge base of Victoria • Join forces with Victoria and BC tourism • Continue cruise line efforts and strengthen relationships • Focus on new opportunities - European brands / Asian (long-term)

36. Recommendations • Planning • Where does cruise fit in the overall waterfront plan? • Should be the primary driver of future development for Ogden Point • Master Planning next steps • Layout alternatives • Cost / Benefit analysis • Financial assessment of alternatives (ROI) • Financial and phasing plan • Funding • Management and operations planning

37. Comprehensive approach CRUISE LINES AND ASSOCIATED SERVICE PROVIDERS Plan: Focus on Delivery of the Destination TOURISM INFRASTRUCTURE: AIRPORT, HOTEL, TRANSPORTATION PORT CITY / COMMUNITY ATTRACTIONS & SITES

38. Ogden PointCruise Market AssessmentAugust 16, 2012 Bermello, Ajamil & Partners